To ensure that benefits maintain their buying power, the SSA adjusts them with the cost of living. You can earn up to four credits a year, equivalent to $6,920 in work income in 2024. It takes 40 credits, or 10 years of covered work, to qualify for retirement benefits (the 10 years do not need to be consecutive). The rate has been the same since 1990, but the amount of income subject to it changes annually in line with national wage trends. In 2023, you paid Social Security taxes on work income up to $160,200. Earnings above that level are not taxed for the purpose of funding Social Security, nor is any income from investments.
Here’s the Maximum Possible Social Security Benefit at 62, 66, 67, and 70
Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services. Consistently earning a salary that high is quite an achievement and will set you up well for retirement. If you want to maximize Social Security, you’ll need to consistently earn a high income throughout your career. How much of your preretirement income Social Security is designed to replace.
Retirees set to earn up to $4,873 starting this month: What to know about 2024 Social Security benefits
The purpose of the COLA is to ensure that the purchasing power of Social Security and Supplemental Security Income (SSI) benefits is not eroded by inflation. There are certainly risks involved with delaying benefits until age 70, but they err on the side of being too conservative (like passing away before you break even, versus claiming early). For someone with lots of wealth to conserve, that’s not a bad way to err. If you earn above that limit for 35 years in your career, you’ll earn the maximum possible Social Security benefit.
Your COLA Notice
The benefit amount is calculated based on factors that include the year when collection begins, FRA, and whether an individual will continue to work while collecting benefits. More than 71 million Americans will see a 3.2% increase in their Social Security benefits and Supplemental Security Income (SSI) payments in 2024. On average, Social Security retirement benefits will increase by more than $50 per month starting in January. You become eligible for retirement benefits by collecting Social Security credits, which you get by doing “covered” work — a job or self-employment in which you pay Social Security taxes on your income.
Getting Started
Here are the three things that must be true for you to max out Social Security. It might be tempting, however, to claim your benefits as soon as possible and leave more of your retirement savings invested in the stock market. The idea is that you might be able to outperform the returns provided by Social Security. Here’s what the maximum benefit looks like at each of these key ages in 2024. The best time to start taking Social Security benefits depends on current income and employment status, other available retirement funds, and life expectancy.
- It is meant to replace a portion of your pre-retirement earnings based on the total amount of money you earn during your time in the workforce.
- Earnings above that level are not taxed for the purpose of funding Social Security, nor is any income from investments.
- More than 71 million Americans will see a 3.2% increase in their Social Security benefits and Supplemental Security Income (SSI) payments in 2024.
- For example, the maximum amount of earnings subject to Social Security payroll tax in 2024 will be higher.
- Congress enacted the COLA provision as part of the 1972 Social Security Amendments, and automatic annual COLAs began in 1975.
- This limit changes each year with changes in the national average wage index.
Here’s the maximum possible Social Security benefit at ages 62, 66, 67, and 70
In 2024, you get one credit for earnings of $1,730, $90 more than the 2023 level. If you collect Social Security and continue to work, a portion of your monthly payment may be temporarily withheld. This earnings test applies to people who collect retirement, survivor or family benefits; have not yet reached full retirement age; and have earnings above a certain level. It is meant to replace a portion of your pre-retirement earnings based on the total amount of money you earn during your time in the workforce.
As you can see, the maximum benefit varies widely depending on the age at which you claim it. A 70-year-old claiming maximum benefits in 2024 will receive $58,476 in annual income. A 62-year-old claiming the maximum benefit will only take home about $32,520, which they’ll likely need to supplement with other retirement savings. When the Social Security Administration (SSA) calculates your retirement benefit, it looks at your earnings history, and it selects the 35 highest-earning years, adjusted for inflation.
You can access this information in early December, prior to receiving the mailed notice. Since you will receive the COLA notice online or in the mail, you don’t need to contact us to get your new benefit amount. The full retirement age is when individuals can collect full Social Security retirement benefits based on the year they were born. The FRA is 66 years and two months for those born in 1955 and gradually increases to 67 for those born in 1960 and after.
But the SSA won’t always count all of your income as part of its calculation. There’s a maximum amount that counts toward Social Security every year called the “contribution and benefit base.” The SSA adjusts the amount for inflation every year. The Social Security Administration (SSA) announced that the maximum earnings subject to Social Security (OASDI) tax will increase from $160,200 to $168,600 in 2024 (an increase of $8,400). The SSA website allows seniors to see estimates for various benefits based on their earnings and when they apply.
This calculation provides an amount comparable to buying power based on the U.S. dollar’s current value. If you have 40 work credits, you can claim Social Security as early as age 62, but waiting until FRA will result in a much higher benefit. If you earn enough to qualify for the maximum possible Social Security benefit, it still matters when you claim.
Claiming at 62 will result in a much lower monthly benefits check than claiming at age 70. On the other hand, you’ll receive eight more years of benefit checks if you claim as soon as possible. Many retirees opt to split the difference, waiting until around their full retirement age to claim benefits. We will mail COLA notices throughout the month of December to retirement, survivors, and disability beneficiaries, SSI recipients, and representative payees. But if you want to know your new benefit amount sooner, you can securely obtain your Social Security COLA notice online using the Message Center in your personal account.
You can also opt out of receiving notices by mail that are available online. Be sure to choose your preferred way to receive courtesy notifications so you won’t miss your secure, convenient online COLA notice. The maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $168,600. Social Security benefits are primarily funded by a 12.4 percent tax on most workers’ incomes. If you have a job, you pay half of that rate (via FICA withholding from your paycheck) and your employer covers the rest. If you’re self-employed, you pay both shares as part of your annual tax return.
To calculate how much you or your family will receive in benefit payments you must create an account on the Social Security Administration website and sign in here. AARP is a nonprofit, nonpartisan organization that empowers people to choose how they live as they age. Get all the latest tax, accounting, audit, and corporate finance news with Checkpoint Edge. The most a person who retires at age 70 in 2024 will receive from the government is $4,873. This year, more than 71 million Social Security recipients will see a 3.2% increase in their checks. For example, if you have a $40,000 job, your benefits for the year would be reduced by $8,840 — half the difference between $22,320 and $40,000.
Social Security’s Old-Age, Survivors, and Disability Insurance (OASDI) program limits the amount of earnings subject to taxation for a given year. The same annual limit also applies when those earnings are used in a benefit computation. This limit changes each year with changes in the national average wage index. Social Security benefits are calculated by combining an individual’s 35 highest-paid years. Wages from previous years are multiplied by a factor based on the years they were earned.
If you don’t have an account yet, you must create one by November 14, 2023, to receive the 2024 COLA notice online. Federal benefit rates increase when the cost-of-living rises, as measured by the Department of Labor’s Consumer Price Index (CPI-W). The CPI-W rises when inflation increases, leading to a higher cost-of-living. This change means prices for goods and services, on average, are higher.
It then averages those 35 years and puts that number into a formula to determine your primary insurance amount (PIA). That’s the amount you’ll receive if you claim benefits at your full retirement age, which ranges from age 66 to age 67, depending on when you were born. If you claim before your full retirement age, you’ll receive less than your PIA; if you claim after, you’ll receive more. Individuals who wait past their FRA to collect Social Security retirement benefits receive credits for each month that they delay up to age 70. Once all wages are indexed, an average indexed monthly earnings (AIME) is computed by dividing the sum of all indexed wages by 420 (35 years expressed as months).
